I know how to produce more jobs. Pay people less.
One thing in the boatload of irksomeness that is Donald Trump is that he makes such ridiculous statements about important issues that the in-depth national discussion of them that we should be having is drowned out by the inevitable and wholly understandable guffaws and head shaking about his overall wackadoodliness.
That's the case with Trump's claim in an interview with Time that unemployment isn't 5.3 percent but actually 42 percent:
Don’t forget in the meantime we have a real unemployment rate that’s probably 21%. It’s not 6. I’s not 5.2 and 5.5. Our real unemployment rate–in fact, I saw a chart the other day, our real unemployment–because you have ninety million people that aren’t working. Ninety-three million to be exact.
If you start adding it up, our real unemployment rate is 42%.
Beneath the stupidity of this calculation is a matter of real concern. The nation's official gauges of unemployment and underemployment don't truly measure the healthiness or lack of it in the U.S. job situation. That's not because the staffers at the Bureau of Labor Statistics are cooking the books. There are plenty of bureau statistics providing a fuller picture of what's actually going on. But the media focus on headline unemployment rates and new job creation rarely takes those into account.
For one thing, people are counted as employed if they worked 10 hours or even one hour a week in the previous month. There is plenty more that the current 5.3 percent unemployment rate papers over. Such as the continued weakness of wage growth.
Those weaknesses, however, are not repaired by Trump's supercilious calculation.
Join me below the fold for more analysis.
He is right that 93 million American adults are not in the labor force. Most of these adults are in school, being caregivers for children or elderly parents, too disabled to work, retired or have other reasons for not working or looking for work. If you add them all up, it comes out right now to 42 percent of the adult population. But that's not the unemployment rate. Most of them aren't working because they don't want to or they can't. Statistically speaking, being out of the labor force means they are neither employed nor unemployed. The only people the government counts as unemployed are those who ARE in the labor force but don't have a job. Nowhere near 42 percent.
As Jordan Weissmann at Slate points out, the billionaire didn't come up with this calculation himself. Instead, it comes from David Stockman. In case you don't remember him or weren't around when his was a household name, he was budget director during Ronald Reagan's first term and favored the phrase "zero out" when discussing social program budgets. While critical of the Republican Party's approach, he remains a believer in the voodoo of supply side economics to this day.
But just because Trump and Stockman botch their criticism of unemployment statistics doesn't mean there isn't a disturbing trend. Most of the 93 million, as noted, have good reasons for not being in the labor force. They aren't being hidden by nefarious orders from the White House.
A growing percentage of Americans is part of that gigantic cohort of baby boomers who are retiring. Retirement age is now 66 and the first wave of baby boomers (born in 1946) started turning that age three years ago.
It's true, as we've noted often in the past, that far more people over that retirement age have continued working than before—partly because they lost big chunks of their savings and investments during the Great Recession or because private corporations have screwed them out of their pensions. Or because they just want to.
Whatever the case, the plunge in the labor force cannot be attributed solely to baby boomers no longer working. But, as this cohort gets older and younger boomers also reach the age when they can collect Social Security, retirements will accelerate. And, because that boomer cohort is so big, the percentage of people not in the labor force is going to be larger than in the past for quite some time into the future.
But there's another cohort—people in their "prime working years" aged 25-54—who have left the labor force in the past 15 years. The percentage of the U.S. population in this age group that was employed peaked in April 2000; 81.9 percent of them were working then. That had fallen to 79.7 percent in December 2007 and hit bottom at 74.8 percent in November 2010 in the depths of the Great Recession. Since then the rate has been rising slowly. In July, however, after months on a plateau of 77.2 percent, the rate fell to 77.1 percent.
While the government counts some of those in the prime working-age cohort as unemployed because they are still looking for jobs, a larger proportion than previously isn't part of the labor force at all. Which means millions of people who historically have been the core of the U.S. labor force have dropped out entirely.
There are a number of theories about why this is so. One view is that of economics blogger New Deal democrat, who argues compellingly that the cost of childcare is so onerous in the face of a job market where wages aren't keeping up. If that really is what's keeping many of the people in that age bracket out of the labor force, it ought to spur progressive politicians to come up with some policies to address it.
But you can bet that it wouldn't be addressed by a president who thinks real employment is 42 percent and that people would be better off if they would only work for lower pay.